Introduction to elliott wave fibonacci spread trading

Exits – Towards Price Target Trailing Stop3-day High Projected Support Levels... Exits – Towards Price Target Trailing Stop3-day High Projected Support Levels... Trend-Continuation Ent

Trang 1

Elliott-Wave Fibonacci Spread TradingPresented by Ryan Sanden

The inevitable disclaimer:

Nothing presented constitutes a recommendation to buy or sell any

security While the methods described are believed to be effective in

the long run, no guarantee of efficacy is being made Trading involves

risk I will in no way be responsible for any decisions or trades made as a

direct or indirect result of this material Full understanding of all trading

instruments and exchanges is the sole responsibility of the trader

Ryan owns positions in the following related securities discussed herein: SDS

Trang 2

Principles of Market Trends

• Markets move in trends.

• Movements with the trend are called “impulses”

• Movements against the trend are called “corrections”

• Trends eventually change

Trang 3

• Trends depend on their time frame.

• Green = uptrend

• Red = downtrend

6 Trends

Trang 4

• Green = uptrend

• Red = downtrend

48 Trends

Trang 5

• Green = uptrend

• Red = downtrend

1 Trend

Trang 6

• Green = uptrend

• Red = downtrend

Which is correct? They all are Which you trade is up to you.

Planning to trade one trend while acting on movements in another trend

is called a trend relativity error It is one of the most common trading mistakes.

Trang 7

Markets tend to advance in 5 waves, and retrace (correct) in 3 waves.

Larger-degree uptrend (higher time frame trend is up)

Trang 8

Markets tend to advance in 5 waves, and retrace (correct) in 3 waves.

Larger-degree uptrend (higher time frame trend is up)

Trang 9

Principles of Elliott Wave Theory

Markets tend to advance in 5 waves, and retrace (correct) in 3 waves

1 2

3 4

5

A

B C

Larger-degree downtrend (higher time frame trend is down)

Trang 10

Principles of Elliott Wave Theory

Markets tend to advance in 5 waves, and retrace (correct) in 3 waves

Larger-degree downtrend (higher time frame trend is down)

1 2

3 4

5

A

B C

Trang 11

These structures “repeat” That is, they connect together:

1 2

3 4

5

A

B C

If I take away the colors and labels It really looks like the stock market

Yet, the underlying order is there if you know what to look for

Trang 12

1

2

Trang 13

iii iv

v

a b

c

1

2

i ii

iii iv

v

a b

c

3

4

i ii

iii iv

v

5A

B

C

i ii

iii iv

v

a b

c

i ii

iii iv

v

A

B

C

Trang 14

An Idealized Market

Trang 15

Major Degree Waves – “The Big Trend”

Trang 16

Intermediate Degree Waves – “The Major Moves”

Trang 17

Minor Degree Waves – “The Daily Wiggles”

Trang 18

Nested Waves Elliott-Wave “map” of the market

Trang 19

Nested Waves Elliott-Wave “map” of the market

Intermediate 1 of Major 1

Minor A of intermediate 2 of Major 1

Minor 4 of Intermediate 3 of Major 1

Intermediate B of Major 2

Trang 20

S&P 500 Example: Daily Bars.

September 2007 through January 2008

v

(Market Top)

i ii

iii iv

v

a

b c

a

b

c

Trang 21

Q: That’s Wonderful How can I use this knowledge?

A: The better we can predict where we are in the structure, the

better we can predict the next move in the market

For example, let’s pretend that the above chart is “now”

We can see enough to clearly identify the above wave count

We just finished a “2” of the of the “green” waves, and now we expect

a “3” of the green waves Therefore, we are bearish This is true even

though the casual observer looks at the chart and sees a bottom!

Trang 22

Q: How do we know when we’re wrong?

A: This is a very important question When we don’t have a firm opinion

of the market anymore, we should exit the trade This becomes a stoploss The waves offer natural stop loss points!

Trang 23

Fibonacci

To make life easier, each wave has a “target” region for where it should end

We use Fibonacci relationships to plot these on the chart in advance

For example, Wave 2 target is 50%-78.6% of Wave 1:

78.6% retracement 61.8% retracement 50.0% retracement

1

2

Trang 24

Green Wave 1 down is finished Currently in Green Wave 2 up

This wave should end somewhere between $145.99 and $150.71 ($147.94 is best.)

Trang 25

A

BC

Getting an “ABC” from here would be ideal…

Trang 26

That would be a reversal

Trang 27

Now, we have to “project” a likely extent for Wave 3:

Wave 3 is generally 1.000 to 1.618 of Wave 1, projected from the end of Wave 2.This is technically named an “alternate price projection”

1

2

100%

161.8%

Trang 28

Although it’s a little more tricky, we can project time the same way:

Wave 3 is generally 1.000 or so (in time) of Wave 1, projected from the end of Wave 2.This is technically named an “alternate time projection”

1

2

Trang 30

Looks like we’re shooting for 123 to 133 sometime in the middle of January

Trang 31

Price and Time Targets for Various Waves

Around 100% of Wave A, projected from end of Wave B

61.8% to 161.8% of Wave A, projected from end of Wave B

Wave C

Around 61.8% of Wave A 50% to 78.6% of Wave A

Wave B

Can’t be projected This wave is created

by fundamentals and is how fundamentals drive the market.

Wave A

Around 100% of Wave 1, projected from end of Wave 4

100% of Wave 1, projected from end of Wave 4

Wave 5

Around 61.8% of Wave 3 38.2% to 61.8% of Wave 3

Wave 4

Around 100% of Wave 1, projected from end of Wave 2

100% to 161.8% of Wave 1, projected from end of Wave 2

Wave 3

Around 61.8% of Wave 1 50% to 78.6% of Wave 1

Wave 2

Wave 1

Time Price

Wave

Note: There are others! I am just presenting basic ideas here.

Trang 32

How it played out:

Trang 33

33

Trang 42

Review of Process (thus far)

• 1 Label Waves

– Determine Bullish or Bearish

– Determine Stop Loss

• 2 Perform Price and Time Projections

– Get an idea for approximately where and when we should expect trend reversal.

Trang 43

Entries

Reversal Day

•Close below today’s open (red candle day)

•Close below yesterday’s close (down day)

•Stronger signal if it made a new high as well

Projected

Resistance

Trang 46

Entries

Projected

Resistance

Trang 49

Entries

Stop

Risk onPrincipal

PaperProfit

Trang 53

Inside Day Its range is “inside” the previous day’s range.

Trang 54

2

Trang 55

23

Trang 56

3-Day High

Trang 57

Exits

Stop

Risk

Trang 61

Exits

New Stop(3-day High)

Profit

Exceeded Pivot – Move to Trailing Stop

Old Stop

PaperProfit

Trang 63

Exits

Profit :-/

Trang 64

Exits – Towards Price Target

Projected Support Levels

Trang 65

Trailing Stop(3-day High)

Trang 66

Trailing Stop(3-day High)

Trang 68

Region Hit:

Switch to 1-day High

Trang 69

Region Hit:

Trang 70

Region Hit:

If this is a major collapse,

we want to hang around for it

Therefore, we continue with thetight trailing stop instead of justtaking profit immediately

Trang 71

Reversal Close trade

Day-Go long?

Trang 72

Trend-Continuation Entries

Projected Resistance Levels

Reversal Day– But we missed it

Should have sold short,

but I didn’t see it Still good profit

potential left though What now?

Potential profit However,risk is too large to enternow (stop loss too far away)

Trang 73

Inside Day Trend-Continuation Entry

Inside day This day’s range is “inside” the previous day’s range

Sell Short if price exceeds this

Stop loss goes here

Trang 74

Outside Day Trend-Continuation Entry

Outside day This day’s range is “outside” the previous day’s range

Sell Short if price exceeds this

Stop loss goes here

Trang 75

Reversal Day that we missed

Trang 76

Trang 77

Outside Day

Trang 78

Enter if we go below thisStop loss will go here

Trang 79

Trang 80

Trang 81

Entered here

Stop

Trang 82

Stop

Trang 83

Stop

Trang 84

Stopped Out

Figures

Trang 85

Trang 86

Trang 87

Inside Day

Trang 88

Trang 89

Trang 90

Another Inside Day!

Trang 91

Trang 92

Entered at the open

Trang 93

Stop

Trang 94

Stop

Trang 95

Stop

Trang 96

Stop

Trang 97

New Stop3-day High

Trang 98

New Stop3-day High

Trang 99

New Stop3-day High

Trang 100

New Stop3-day High

Trang 101

New Stop3-day High

Trang 102

Getting Close:2-day high

Trang 103

Reversal Exit

Trang 104

McDonalds filesChapter 11 oncredit losses

Trang 105

Bear Market S&P 500 Activity

• We will now go through a step-by step

walkthrough of the entire Bear Market,

from the beginning.

• It will begin very detailed, but eventually

just show the method is working.

Trang 106

106

Trang 119

Note: I am deliberately counting this section differently from at the beginning

of this presentation And it still works! This shows the versatility of these techniques.

Trang 120

120 Note: I am deliberately counting this section differently from at the beginning

of this presentation And it still works! This shows the versatility of these techniques.

Trang 121

121

Trang 158

Choosing the Spread

Here’s our example from before We said we are expecting approximately

$123 to $133 sometime in the middle of January

Always target the worst-case scenario: Assume the stock goes to $133

We therefore want a bear put spread with the short put at $133 For long put, choose

an ITM option with strike above stop loss The more ITM, the better

Trang 159

Choosing the Spread

So, we have established a bear put position:

SPY @ $144.84 (Dec 11, 2007) Stop @ $150

Long Put: Jan 2008 $160Short Put: Jan 2008 $133

At VIX = 30, the following are the most likely prices:

Long Put: $16.37Short Put: $1.44 Put Spread: $14.93

If we hit stop at expiration (worst-case scenario):

If we hit profit target tomorrow (again, not as good as if it happens next month):

(Spread is better when extrinsic value in short option

is greater than extrinsic value

in long option)

Trang 160

Choosing the Spread

If we hit profit target at expiration:

So, if we are right, spread will be worth between $22.02 and $27.00, which,considering the original spread cost was $14.93,

represents profits of 47% and 81%

If wrong, spread will be worth $10 and will represent a loss of 33%

If we hit stop tomorrow (not as bad):

Long Put: $12.26Short Put: $0.70 Put Spread: $11.56 (loss of 23%)

Trang 161

Risk Management

If we risk our whole account every time, eventually we’ll be wrong three times

in a row and lose 50% three times (thus losing 87.5% of the account) That’s not good

We solve this by only risking 3% of our account on any trade

We said the risk in the spread was 33%

To position size, simply divide 3% by 33%: 0.03 / 0.33 = 9.1%

Therefore, we can buy 9.1% of the account on this option spread The rest

should be held in cash On a $100,000 account, we buy $9100 of this spread

Since the original spread price was $14.93, we buy a 6-contract spread

If we are right, we should get a return between 47% to 81% We’ll say 65% for

sake of argument

65% return on 9.1% of your account is 5.9%

For intermediate-term investing, you will trade a spread around 10 times per year

(Wrong 10 times: -26%)

Trang 162

Special Thanks To:

Dynamic Trading, by Robert Miner

Little of anything presented today is original I now credit my primary source

And direct you to this book for more detailed instruction if you are still interested

Trang 163

163

Tiêu đề	Introduction to Elliott Wave Fibonacci Spread Trading
Tác giả	Ryan Sanden
Trường học	Unknown University
Chuyên ngành	Finance / Trading
Thể loại	Lecture
Năm xuất bản	Unknown Year
Thành phố	Unknown City

Định dạng
Số trang	164
Dung lượng	1,58 MB